Auditor Reputation, Auditor Independence and the Underpricing of IPOs

Chen, Kai; Lin, Anna; Siregar, Dona

doi:10.33423/jabe.v20i6.370

Cited by 3 publications

(3 citation statements)

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“…Audited results play a crucial role in addressing the information asymmetry between firms (private to public company information) and stockholders. In line with the notion that credible auditors reduce confusion surrounding the IPO environment and help resolve the information asymmetry, there is usually a negative correlation between the auditors' reputation and initial returns [11]. Titman and Trueman's [12] study on the credibility of auditors and IPO initial returns predicts that riskier companies prefer auditors of lower quality.…”

Section: Auditors' Reputationmentioning

confidence: 97%

Auditors, Underwriters, and Firm Owners’ Interaction in an IPO Environment: The Case of OECD Nations

et al. 2021

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This study explores the effects of interactions among key stakeholders, i.e., auditors, underwriters, and firm owners on IPOs’ first-day returns in selected OECD nations. It also examines the alteration effects of legal origin (Common law and Civil law) on the relationship between the interacted key stakeholders and IPOs’ first-day returns. A total of four thousand one hundred and sixty-four IPOs from twenty-eight OECD nations are included in this study. Since it is cross-sectional data, a two-stage least square regression is applied. The empirical outcomes indicate that, in general, the interacted reputable underwriters and auditors have a positive impact on IPOs’ first-day return. The relationship is modified between common law and civil law nations, whereby in civil law nations, no significance is demonstrated except for the interaction between the reputable auditors and underwriters. In the common law nation, interactions between reputable auditors and ownership retention have an impact on IPOs’ first-day return. The research findings provide outlooks into an IPO framework for issuers, investors, and regulators. Issuers may want to weigh carefully the costs and benefits of hiring credible auditors and underwriters when going public as they act as signaling agents. As for the investors, they should take into consideration the involvement of reputable underwriters and auditors and the degree to which the IPO firms retain ownership, as the interactive effects give clear signals on firm valuation and IPOs’ first-day returns. Regulators may find the findings informative concerning the creation of a more organized regulatory and financial system that could lead to a deeper and more open financial market.

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Section: Auditors' Reputationmentioning

confidence: 97%

Auditors, Underwriters, and Firm Owners’ Interaction in an IPO Environment: The Case of OECD Nations

et al. 2021

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“…The relationship between auditor reputation and underpricing has been researched in numerous studies (Arora & Singh, 2019;Chen et al, 2018;Nazihah et al, 2020). The utilization of reputable capital market institutions, that is, underwriters and auditors give legitimacy to IPO firms because they help in reducing uncertainty about future cash flows and therefore reducing underpricing.…”

Section: Table 1 Ipo Firms and Underpricing Inmentioning

confidence: 99%

Accrual-based vs cash-based accounting in affecting underpricing phenomenon: Evidence from emerging country

Soesetio

Siswanto

Istanti

et al. 2022

JEM

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Until now, more than 80 percent of shares are underpriced at every IPO event around the world, making it a phenomenon and a big unsolved puzzle, so it is still interesting and relevant to research, especially in emerging countries. This study aims to reveal the impact of profitability information based on accrual and cash on the phenomenon of underpricing on the Indonesia Stock Exchange (IDX). The sample used was firms that conducted IPOs on the IDX from 1994-2020 that had met the sample criteria of 475 firms using the purposive sampling method. Furthermore, the collected cross-section data were analyzed using ordinary least square (OLS) regression. The study concluded that only accrual-based profitability information consistently affects underpricing. These results also support the argument that the use of the accrual-based is better than the cash-based to predict underpricing. This study implies that IPO firms to pay more attention to, strengthen, and maintain their 'earnings' so that investors are more confident regarding the firm's future business continuity. In addition, investors are more detailed in using information from the prospectuses of large firms.

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“…Their result showed that the reputation of the issuers reduces the IPO underpricing only by reducing the information asymmetry and signaling quality of the issuer company. Balsam, Krishnan, and Yang (2003) and Chen et al, (2018) believed that managers are less likely to manipulate profits in firms that have had highquality auditors as the level of accruals in such companies is low . As Gramling and Stone (2001) also found, there is a strong correlation between current-year profits and the future cash flows of firms audited by expert auditors.…”

Section: Audit Firm Sizementioning

confidence: 99%

Conservatism and Initial Public Offerings (IPOs) Underpricing: An Audit Quality Perspective

Daryaei

Azizi

Fattahi

2022

IJFIFSA

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Auditor Reputation, Auditor Independence and the Underpricing of IPOs

Cited by 3 publications

References 0 publications

Auditors, Underwriters, and Firm Owners’ Interaction in an IPO Environment: The Case of OECD Nations

Auditors, Underwriters, and Firm Owners’ Interaction in an IPO Environment: The Case of OECD Nations

Accrual-based vs cash-based accounting in affecting underpricing phenomenon: Evidence from emerging country

Conservatism and Initial Public Offerings (IPOs) Underpricing: An Audit Quality Perspective

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